Country Report Lebanon March 2009

Outlook for 2009-10

• The national unity government is expected to survive until the June 2009 election, and the confessional allocation of parliamentary seats under the constitution will limit the extent of changes to the composition of parliament.
• Political risks will remain elevated. Increasingly bitter disputes and shifts in political alliances are likely in the run-up to and aftermath of the June 2009 general election, and the result could be disputed.
• The combination of political divisions and the global economic downturn is likely to limit progress with economic reform and privatisation plans.
• The fiscal deficit is projected to be 10.6% of GDP in 2009, before narrowing slightly, to 10.1% of GDP, in 2010.
• Global GDP growth is set to fall sharply in 2009, with only a patchy recovery in 2010. Middle Eastern growth will be pulled down as oil prices weaken.
• Lebanon's real GDP growth is forecast to slow to 2.4% in 2009, as world trade and investment suffer, picking up marginally to 3.3% in 2010.
• The current-account deficit is forecast to narrow to 10.8% of GDP in 2009, as import prices fall, before widening to 13% of GDP in 2010.

Monthly review

• The UN-Lebanese tribunal to prosecute suspects in the 2005 murder of the former Lebanese prime minister, Rafiq al-Hariri, has opened in The Hague.
• Hizbullah has called for the release of four senior generals detained in Beirut since 2005. The UN tribunal has said that it will seek their extradition.
• Saad al-Hariri, a member of the anti-Syrian "March 14th" alliance, has said that he will not join a national unity government if the pro-Syrian "March 8th" alliance wins the election.
• Hizbullah officials have reiterated their desire for another national unity government after the election.
• The government has estimated that private-sector wage rises, reconstruction spending and disbursement of overdue government payments will inject liquidity equivalent to around 10% of GDP into the economy in 2009-10.
• The IMF has praised Lebanon's "prudent macroeconomic and financial policies" and has recommended a "cautious" approach to interest rate policy.
• Bank deposits have continued to rise. In January 2009 non-residents' deposits rose to L1,433bn (US$950m), more than double the January 2008 level.
• The trade deficit widened to US$12.7bn in 2008, according to new data from the central bank (which differ slightly from IMF data).

Source: Country Report